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Defunct crypto lender Celsius has filed a lawsuit against Tether, accusing the stablecoin issuer of asset misappropriation. This move comes amidst the recent attempts by the cryptocurrency company, who declared bankruptcy in 2022, to claw back billions of dollars in funds for creditors.
Why Celsius Is Requesting Over $3.5 Billion From Tether
Bankrupt Celsius has filed a number of lawsuits against various cryptocurrency companies in recent weeks, and the world’s largest stablecoin company Tether is the latest name on the list. Other firms currently embroiled in various legal battles with the now-defunct crypto lender include Badger DAO, Bancor, and Compound.
On Friday, August 9, Celsius submitted its largest lawsuit against Tether, seeking billions of dollars in Bitcoin returns, damages, and legal fees. According to the latest court filing, the company wants a refund of 39,542 BTC it used as collateral for loans it took from Tether.
When the price of Bitcoin began to decline in early 2022, Tether allegedly requested more collateral from Celsius to cover the loans. The latest court document also revealed the crypto lender had taken out an additional $300 million in USDT loans from Tether a few months before — and within 90 days of — filing for bankruptcy in July.
Celsius claimed to have obliged the request for additional collateral, sending more BTC as collateral on several occasions between May and June 2022. Following this payment, Tether made a second collateral demand but decided to liquidate Celsius’s collateral before the mandated ten-hour waiting period.
In its lawsuit, Celsius argues that Tether liquidated the collateral at a price point that unfairly benefited the stablecoin issuer without allowing the lender to provide the additional collateral. The court filing read:
If Celsius had been given the opportunity to meet the collateral demand—which it had the contractual right to do—it could have been able to avoid the disposition of its Bitcoin at near the bottom of the cryptocurrency market. Instead, that disposition was carried out for the benefit of just one creditor: Tether
According to the filing, Celsius is asking the court to order Tether to relinquish the 15,658.21 Bitcoin, 2,228.01 Bitcoin, and 39,542.42 Bitcoin preferentially transferred by the crypto lender to the stablecoin issuer. These transfers sum up to 57,428.64 BTC, which, at the current Bitcoin price of $61,110, is equivalent to roughly $3.5 billion.
Tether Labels Lawsuit A ‘Shakedown’
In a new blog post, Tether vehemently denied committing any wrongdoing against Celsius, calling its recent lawsuit “baseless.” According to the stablecoin company, Celsius is failing to recognize the clear validity of the agreement made years before its bankruptcy.
Tether said in the blog post:
We look forward to responding in court to this contrived, meritless shakedown that will benefit nobody other than the lawyers, bankers and consultants involved in bringing this case.
Tether CEO Paolo Ardoino reiterated the company’s stance in a post on the X platform, stating their willingness to set an example of shameless money grabs in court.
In 2022, Tether made available USDt to some of its customers – including Celsius. Tether's arrangements with customers are very simple: Tether provides USDt to selected customers who provide an overcollateralization in Bitcoin.
If the price of bitcoin (the collateral) falls… https://t.co/UuEs1ig8zr
— Paolo Ardoino 🤖🍐 (@paoloardoino) August 10, 2024
Finally, Ardoino wasted no time mentioning Tether’s $12 billion consolidated equity and reassured USDT holders that, in the “most remote scenario” where the lawsuit escalates, they will not be impacted.
Featured image from PYMNTS, chart from TradingView
